What is the expected annualized yield on the bonds

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Problem - Predicting Bond Values - Sun Devil Savings has just purchased bonds for $38 million that have a par value of $40 million, five years remaining to maturity, and a coupon rate of 12 percent. It expects the required rate of return on these bonds to be 10 percent two years from now.

a. At what price could Sun Devil Savings sell these bonds two years from now?

b. What is the expected annualized yield on the bonds over the next two years, assuming they are to be sold in two years?

c. If the anticipated required rate of return of 10 percent in two years is overestimated, how would the actual selling price differ from the forecasted price? How would the actual annualized yield over the next two years differ from the forecasted yield?

Reference no: EM132914113

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